Credit, collections & insolvency news

For businesses, up and down the country, Christmas is one of the most hectic periods. Product and service demand can double or triple, leaving many in a lucrative position in the new year. However, not all business owners have a positive experience of the festive season. Christmas can be challenging for a number of reasons, but staying on top of your own company’s health and that of your supply chain should be the number one priority on the seasonal survival list.

Times are changing

Whilst over the years Christmas has been the culmination of the peak period and the profits that go with it, enabling businesses to scale far beyond any other period in the year, there is a clear shift in consumer spending and it’s even hitting the big retail chains hard.

With recent news about how the likes of mainstream retailer Bonmarché experienced its worst trading since the 2008 recession and Superdry issued its second profit warning in two months, it isn’t just SMEs that should be properly evaluated this Christmas. If the addition of House of Fraser’s recent string of store closures has taught business owners anything at all, it should be that no business is too big or too strong to suffer hurdles and financial strain.

Never take the strength of a business at face value, irrespective of what perceptions many may have had in the past around Christmas, and the types of businesses that thrive in this period. Every single business must be checked before any business agreements are put in place.

With the good comes the bad

Profits and company turnovers can, of course, drastically increase due to heavy consumer spending. This is something most of us have an awareness of, but with the peaks, can also come the troughs. Purchasing more stock or hiring more staff to fulfil consumer need is not cheap, but can sometimes be necessary to stay afloat.

Another potential danger that Christmas could bring relates to cash flow. Businesses could easily find it more difficult to get their invoices paid on time during the festive break, which puts a huge strain on a company’s financial stability. It is imperative with all of these potential risks that businesses ensure they are not finding themselves in a financial quandary by looking into suppliers’ payment histories and staying vigilant with their own payment processes.

Who are you really dealing with?

With the busy atmosphere and the hectic manner of the Christmas period, it can be easy to let usual standards and practices slip, but dropping the ball could be detrimental to business. It is more important than ever to do your due diligence on any business you work with, this also counts for suppliers you have worked with before. Business success can be fleeting and sometimes difficult to spot from the outside looking in. Make no assumptions when choosing who to give your custom to, regardless of any false sense of familiarity you may have.

When dealing with a new customer or supplier, it is crucial to check their credentials thoroughly as an initial port of call to ensure they are creditworthy. A company’s credit report can speak volumes to whether doing business with that company is a good decision, and can provide a wealth of information around key financials over the last five years. This is the kind of insight that every business should be aiming to have in their arsenal over the next couple of months to keep themselves and their bottom line protected.

Credit checks: What to expect?

A company credit report summarises all the information in a company’s credit history and grants a score to a business based on its previous behavioural patterns. You can also view a company’s payment behaviour based on real experiences, so you are able to know how quickly, on average, they pay their bills. This is especially important if you are concerned about Christmas cash flow. A credit report also shows whether a company has any County Court Judgements (CCJs) against them: this could be a red flag for you or mean that you want to insist on special terms with them.

A company credit check will allow you to see a credit score on a report that acts as an overview of a business’ insolvency likelihood. From payment patterns of behaviour, to CCJs or bankruptcy filings, which give a good indication on the strength of a company’s cash flow and money management, you will have access to any potential red flags that could mean moving forward with a business partnership may be a bad idea.

It’s important to note that these insights can also give you the tools you need to be able to tailor the terms of your working relationships to keep your business safer. For example, if a business has a history of late payments, you can pre-agree terms that enforce payment before delivery of a product or service. Whichever choice you make as a business, credit checking helps you stay ahead of any potential surprises this Christmas season.

Christmas is often a time for reflection and positive growth, and staying on top of suppliers both old and new will ensure your business continues in a strong way into 2019. Keep an eye on your own business and those around you, and the anticipated January blues may not look so dreary.